An Englishman abroad and a Japanese scandal

Published: 4 December 2012 8:13 AM

TOKYO, Dec 4 — The corporate execution took just eight minutes.

The board of Japanese camera and endoscope maker Olympus Corp voted unanimously on October 14, 2011 to fire president and CEO Michael Woodford, one of the few foreigners ever to run a major Japanese company.

There was no discussion and Woodford was not allowed to comment. His secretary had been told to leave the building so he could not say goodbye to her. He was ordered to leave his apartment within a few days, and told he must take the airport bus when leaving the country, rather than a company car. The summary justice was almost unprecedented in Japan’s corporate culture.

In his memoir “Exposure — Inside the Olympus Scandal: My Journey from CEO to Whistleblower,” (Portfolio, $27.95/RM85), Woodford (picture) explains how his dogged attempts to find out about a series of suspicious deals had put him in direct confrontation with the board and management teams that had run the company for many years.

Woodford looked like a safe choice when he was promoted to be president of the company six-and-a-half months earlier. He had started with Olympus in 1991 as a medical equipment salesman in Britain, and had steadily climbed up the corporate ladder. He regarded Tsuyoshi Kikukawa, the chairman and the previous holder of the president’s job, as his mentor.

But any idea that Woodford would not rock the boat dissolved after a Japanese magazine Facta published several articles reporting on “Mickey Mouse” deals Olympus had done that had nothing to do with its main businesses. These included its purchase of a maker of microwavable dishes, a cosmetics mail order firm, and a hospital waste company. There were special purpose companies based in the Cayman Islands, and payments of massive fees to advisors.

Woodford called in accountants PricewaterhouseCoopers, who produced a damning report. But his attempts to get those involved in the deals to be accountable led to his ousting.

He wasn’t going to go quietly. He mounted a campaign to get shareholders to replace the board. He was prepared to return to run a reformed company, but it became clear that Japan Inc. was not going to let this foreigner radically transform the way things were done. Olympus’ board, its Japanese shareholders and bankers closed ranks.

Grew up in poverty

As Woodford launches this book — which is likely to be followed by a movie — and goes on the international lecture circuit to talk about the need for corporate reform in Japan, he acknowledges his mission is very difficult. The resistance to change goes very deep. Despite all the media coverage in the past year, there is still much that hasn’t been explained about the Olympus scandal.

While much of the appeal of this book is in its thriller-like elements — justifiably or not, Woodford and his wife feared for their lives — it is also fascinating because of the personal elements that he introduces.

We learn how Michael Woodford grew up in a harsh environment after his mother left his father at an early age and took him to live in poverty in Liverpool. His home didn’t have a bath and he had to wash in a public bathhouse. He faced racial taunts as a child attending a Jewish school and possessing vaguely Asian features, which he explained without providing detail came from his father’s side of family.

Most relevant, Woodford writes of developing from an early age a distinct sense of justice and civic responsibility. After stealing chewing gum from a store, his conscience drove him to return it.

Witnessing as a teenager a fatal crash that killed a motorcyclist led to a life-long commitment to road safety. He has been involved in more than 1,000 road-safety projects. If he sees a road danger that could be reduced he will stop to take a picture and send a report to the relevant traffic authority.

We also learn how Woodford’s insecurity at home helped to produce the drive to build a sales career after leaving school at the age of 16 without any major qualifications.

It is a combination of that sense of right and wrong, the insecure man’s determination, his sense of civic duty, and his determined nature that led him to expose wrongdoing at Olympus.

Nightmares

Woodford also shows how his battle with Olympus impacted his Spanish wife, Nuncy, who had not wanted him to take the job in Tokyo in the first place. At the height of the stress on the Woodfords from the scandal, she began to have nightmares in which she screamed, “They’re going to get us.” And at one stage things get so tense between the couple that a panel gets smashed in the front door of their home.

There are also, though, surreal moments. Such as the Woodfords’ decision not to call the police on their neighbour’s kids when they had a rowdy party for fear that armed officers — who were on call to protect the couple — would storm the place. And at times Woodford gets carried away with his new “rock star” status as he is mobbed by the Japanese media at the airport.

Perhaps the most poignant moment comes at the end of the book when Woodford has a clandestine rendezvous with the original whistleblower, an Olympus employee who had provided Facta with much of its information. The whistleblower apologises for not going straight to Woodford with the scandal — “I didn’t know you weren’t one of them.”

It may say a lot about the current state of corporate governance in Japan that this whistleblower remains anonymous. In the United States, a whistleblower in such a high-profile case might by now be featured in the media, be writing a book, and be claiming a big reward. In Japan, they live quietly, in fear. — Reuters

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